What happens about notice when someone is made redundant?

Answers to some of the frequently asked questions we receive about notice periods and redundancy

As many businesses are having to reduce their workforce by making redundancies questions are arising frequently about what happens to notice when someone is made redundant.

1. How much notice must we give an employee to terminate their employment?

By law, the minimum notice period that an employer must give an employee is:

• One week’s notice if they have been continuously employed for one month or more; and
• One additional week’s notice for each complete year of continuous employment, up to a maximum of 12 weeks’ notice.  

However, the employee’s contract may entitle the employee to a longer period of notice than the minimum legal (statutory) notice period.  If this is the case, an employer will have to give the employee their contractual notice.   Conversely, if the employee’s contractual notice period is less than the legal minimum, an employer must still give the legal notice.

2. Can we pay in lieu of notice even if the contract does not allow this?

Technically speaking, if the employment contract does not contain a provision allowing an employer to pay an employee in lieu of notice, then there will be a breach of contract and the employee will be entitled to bring a claim for damages for breach of contract (also known as a “wrongful dismissal” claim). 

However, providing an employer ensures that the payments made in lieu of notice are equivalent to the salary and benefits that the employee would have received had they worked out their notice period the employee should have no outstanding claim for wrongful dismissal.  

Please note, however, that if the employee’s contract contains restrictive covenants, there is a very real risk that an employer’s breach of the employment contract will make these restrictive covenants unenforceable.   In this case, a more preferable option may be to put the employee on garden leave for the duration of their notice period.     

3. Can the payment in lieu of notice be paid tax free?

No. A payment in lieu of notice must always be subject to deductions for tax and national insurance contributions.  This is regardless of whether the contract allows you to pay an employee in lieu of notice or not.    It follows therefore that you cannot “roll” a payment in lieu of notice together with a statutory redundancy payment and pay it as a tax free sum.         

4. Can we withdraw notice once it has been given?

No.  You can only withdraw it with the agreement of the employee.

5. Are we allowed to ask an employee to do different duties during their notice period?

Technically, no, unless of course the employee agrees to carry out different duties or they have very clear wording in employment contract allowing an employer to do this. While working out their notice period employees are still employed and therefore the same contractual principles apply: any material changes to their contractual duties require consent.

6. Does annual leave continue to accrue during the employee’s notice period?

Yes, the employee will continue to benefit from the accrual of statutory holiday pay during their notice period.  They may also continue to accrue any additional contractual leave over the statutory minimum (i.e. over 28 days), but this will depend on the terms and conditions in their contract. 

7. If the employee has accrued a lot of holiday can we require them to take it during their notice period?

First, check the employee’s contract as it may state that the employee is required to take any accrued unused holiday during their notice period. In the absence of anything specific in the contract, the provisions of the Working Time Regulations apply which allow employers to specify the dates on which an employee must take holiday, providing they give the employee the required length of notice.  The notice period which must be given to the employee is at least double the number of leave days that they are required to take.  

8. I have been asked by an employee if they can leave before their notice period has ended. If I agree do, I still have to pay them for the reminder of the notice period.

No. However, you will still have to pay them any statutory redundancy pay to which they may be entitled if the reason for termination is redundancy. 

9. What notice pay do I pay an employee who is on long-term sick leave?

Unless the employee’s contract provides for something different, an employee who is on sick leave during the notice period will be entitled to SSP (subject to the normal qualifying criteria) and the right to any contractual sick pay (providing they have not already exhausted their entitlements).

However, it is important to check whether the legal provisions on notice pay apply to the employee’s situation.   If an employee is unable to attend work because of sickness during their notice period AND the employer only has to give the employee the legal minimum notice period to terminate the contract, the employee is entitled to receive their full pay for their notice period, even if they have exhausted their rights to legal (statutory) or contractual sick pay.     

These legal rights to notice pay do not apply if the contractual notice that an employer has to give to the employee is at least one week more than the statutory notice.    So, bizarrely, if an employee is only entitled to the legal notice period, an employer must pay them their normal wage during their notice period even if they are off sick.    However, if their contractual notice entitlement is only one week more than the legal minimum entitlement, an employer is only required to pay their SSP during their notice period (subject to any additional pay provided for in their contract). 

The legal rules on notice pay also apply to employees who are absent due to pregnancy, maternity leave, paternity leave, adoption leave, shared parental leave, parental leave or annual leave.  

10. I want to put an employee on garden leave during their notice period. Can I do this?

Garden leave is the expression given to the situation where an employer gives an employee notice of termination in accordance with their contract of employment, and the employee receives all their salary and benefits during the notice period, but they are not required to attend for work.

You should check the employee’s employment contract first to see if it contains an express power allowing you to place the employee on garden leave.   Even if the contract does not specifically allow it, generally speaking, as long as the employee continues to receive their normal pay and benefits during the garden leave period, it will not amount to a breach of contract.   The exception to this is where the employee has an “implied right to work”.   The circumstances in which an employee will have such a right are rare, but typically it will arise where the employee is under a long notice period and they are in a role where they need to continue working in order to maintain their skills.  If in doubt obtain the employee’s agreement and/or seek advice.

11. Am I able to claim back any wages that I pay an employee during their notice period under the new Job Support Scheme?

No – the current rules of the Job Support Scheme (JSS) state that an employee cannot be made redundant or put on notice of redundancy during the period within which their employer is claiming a JSS grant for that employee.

It should be noted that we are awaiting further clarification if this applies to a situation where an employee is serving notice for some other reason, i.e. because the employee gives notice to leave for new employment.